Vadodara in Gujarat got its first luxury car outlet in March this year in the form of a Mercedes Benz showroom. Audi took just seven months to bring up the second one: its dealership opened on Monday.
Similarly, Raipur, the capital of Chhattisgarh, never figured in the luxury
carmakers’ scheme of things till Audi opened a dealership a year ago. Three months later, BMW too had set up shop.

Luxury carmakers are expanding aggressively into non-metro centres, as the big cities show signs of saturation. The focus on top cities New Delhi and Mumbai, which used to contribute about 60% of luxury car sales, is slowly shifting. The national capital and Mumbai now account for only 45% of the combined sales volume of Audi, Mercedes Benz, BMW and Jaguar-Land Rover.

“Semi-urban or tier-II and III markets are emerging markets for MB India and also for other players,” said Eberhard Kern, managing director, Mercedes Benz India. “Customers in these markets are matured and gradually getting exposed to luxury.”

Benz opened showrooms in cities such as Coimbatore and Rajkot this year and is looking to open four more this year, taking its total dealerships in India to 61. Audi added non-metro cities such as Lucknow, Bhubaneswar and Karnal to its network.

“We have seen huge potential in tier-II and tier-IIIcities, where customers are showing an increased appetite for luxury cars and are aware of products and quality,” said Joe King, head, Audi India.

Rollout of new showrooms and finance schemes seem to be paying rich dividends for luxury car makers. Amid slowdown in the car market, the niche of luxury segment that accounts for roughly 1.5% is doing well. Audi sales grew 15% to 7,391 units while Mercedes Benz sales is 31% up at 6,461 units in January-September. BMW does not report sales volumes.

Further, companies are also looking at launching cheaper and in some cases low frills versions of existing cars that are in demand in non-metro cities. Mercedes’ recently-launched A-Class, its smallest and cheapest car in India, and the Q3-S, a low-frills version of Audi’s entry level SUV, are examples of this.

“This car has less features but it is still as capable to merit the Audi badge,” said a senior Audi official on the sidelines of the launch of the Q3-S in Delhi last month. “It will find customers in smaller towns who value the badge. The lower price bring it within their reach.”